Accessing your pension

You can only access your State Pension when you reach State Pension age.

If you have a workplace or personal pension, the rules about accessing it depend on whether it is:

A defined contribution scheme – where you and your employer pay in contributions, which are invested and hopefully grow.

A defined benefit scheme – where your employer promises to give you a pension when you retire, which is based on your earnings and how long you have been in the scheme.

Workplace pensions can be either of these types. Personal pensions are always defined contribution schemes.

Defined contribution schemes

There have been major changes to defined contribution schemes since 6 April 2015.

These changes give people greater freedom over how they save, invest or spend their pension benefits.

Before that date, most people in this type of scheme used their pension savings to buy a pension annuity. This is a type of insurance product, which provides an income for life in return for giving up your pension fund. A tax free amount of 25% of the pension fund was available in the form of a lump sum.

This has changed in the following way:

Since 6 April 2015, you can access all your defined contribution pension savings flexibly from the age of 55, and you no longer have to buy a pension annuity.

You can now take all or part of your pension savings as one or more lump sums. You can also invest your savings in a pension product known as flexi-access drawdown, and draw off part of them on a regular or irregular basis to provide an income.

You can still purchase a pension annuity. There are certain insurance companies that offer improved pension annuity rates to people whose life expectancy is reduced as a result of illness such as a cancer diagnosis.

Any combination of the options above is available.

If you have a life expectancy of less than 12 months, you may be able to retire on the grounds of serious ill health.

Defined benefit schemes

Defined benefit schemes are not affected by the April 2015 changes.

When you reach the scheme’s retirement age, you will get a regular pension income as promised by your employer. You can usually also take out a cash lump sum but this will reduce the pension income you get. The amount of pension income you lose is often high so this may not be a good idea.

You can find details about taking your benefits at the scheme’s retirement age in your scheme booklet. If you do not have a scheme booklet, you should ask your employer for a copy.

You may be able to retire before the age of 55 (or the age allowed under your scheme’s rules) if you have ill health.